Positive signs for housing market as mortgage lending to first-time buyers increases in October

Lending to first-time buyers increased in October, fuelling hopes for a ‘more stable and positive’ housing market in 2013, according to mortgage lenders.

The Council of Mortgage Lenders (CML) said a total of 20,000 loans worth £2.5billion were advanced to first-time buyers in October - a 14 per cent increase on last month and 19 per cent higher than a year ago.

The CML said the number of first-time buyer loans has recovered to similar levels to those seen over the summer following a ‘slow’ September and accounted for 40 per cent of all house purchase loans in October for the second consecutive month.

Housing market: The CML latest data shows a 19 per cent increase in mortgage lending to first-time buyers compared to last year

CML director general Paul Smee said the latest figures suggest that an underlying trend of ‘modest’ year-on-year growth in house purchase lending will continue.

He said: ‘If the incremental improvements in house purchase lending that we are currently seeing persist as we expect them to, then next year should feel a more stable and positive year in the housing and mortgage markets.’

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Mortgage availability has increased by a fifth since an £80billion funding for lending scheme was launched at the start of August, but the CML said it is still too early to fully measure the success of the scheme. And so far the strongest competition among lenders has been aimed at people with bigger deposits of at least 20 per cent.

Director of mortgage broker Moneysprite
Ashley Brown said the latest set of mortgage data was encouraging and
added: ‘Nobody denies that activity levels are still historically low,
but we are moving in the right direction.

‘The problem for first time buyers has been how to cobble enough money
together for a deposit, but these figures suggest they are finding a way
to boost their deposit funds, despite having to meet higher living
costs.

‘Certainly the Bank of Mum and Dad is helping to boost deposit funds but
there are a lot of first time buyers out there who have been putting
away money every month for quite a few years. That's starting to show.’

The number of loans advanced to home-movers also increased by 13 per cent on September to 29,400 – a 5 per cent year-on-year rise for a total of £4.8billion.

Meanwhile, remortgage lending reached a six-month high, totalling £3.5billion, although this figure is still low by historic levels and is down by 10 per cent on a year ago, the CML said.

More than a million home-owners have seen their mortgage costs go up since the spring after a string of lenders raised their standard variable rates (SVRs) and concerns have been raised that many will have trouble switching to a cheaper deal as lenders have toughened their borrowing criteria.

The CML suggested that the small increase in remortgage lending could be due to the early effects of the funding for lending scheme.

The scheme has the potential to boost remortgaging levels more quickly than lending to home-buyers due to the longer time-lag in buying a house.

Mr Smee said: ‘An uptick in remortgage lending may be an early sign of a small positive impact of the funding for lending scheme, but it's still too soon to evaluate the effects of the scheme.’